Putting Numbers on Intangible Benefits
12 Pages Posted: 9 Nov 2008
Date Written: December 10, 2004
Intangible benefits have been a thorn in the side of IT project valuation efforts. These benefits are often comparable to tangible benefits in magnitude, and so, should not be ignored. Yet, unless we can attach numbers to them, it is difficult to combine them in a consistent way with tangible benefits to reduce the chances of underestimating the true value of a project. The lack of agreement in both theory and practice, on how to treat intangible benefits, suggests that it continues to be an unresolved yet important issue. In this paper, we suggest a disciplined way, based on system dynamics, to quantify so called 'intangible' benefits. Although it is not algorithmic, the method still has substantial structure and can be implemented and estimated to varying degrees of detail to suit project needs. The method is demonstrated by applying it to a cellular service provider context. A simple but key notion that is used to develop our approach is that of 'induced observability'. It helps to operationalize intangible benefits in a way that facilitates quantification for purposes of project valuation.
Keywords: Intangible benefits, IT project valuation, system dynamics
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